Business Analyst - June 2

Thursday, June 2, 2022
ENTREPRENUERSHIP
Insurance can limit organisational
or industrial liability cost
Maxam Company
Limited, the company whose
mining truck was involved in
the Appiate disaster, has
been fined US$6million.
ACCORDInG to the
statement, Maxam shall
pay the fine of one million
United States dollars
(US$1,000,000) or its cedi
equivalent at the prevailing
commercial rate before the restoration
of its permit to manufacture, store,
supply and/or transport explosives.
Per the statement, given the
demonstrable cash inflows of Maxam
and their current circumstances, the
remaining five million United States
dollars (US$5,000,000) shall be paid in
eighteen (18) equal monthly
installments, beginning from 1 March
2022 to 1 August 2023 (Atinka online).
The main goal for most businesses is
to earn a profit. Generating profits in a
business environment often indicates
that an organisation is offering goods or
services desired by consumers at a
reasonable price. Developing a strong
clientele and a competitive advantage
against other companies in the market
may require much time and effort on
management’s part as it seeks to
produce desirable goods or services that
produce profits. Business organisations
that cannot complete these functions
may face the prospect of losing money
from their operations and dealing with
the consequences of financial loss.
Again, there are so many other ways
that organisations or industries could
lose money. One of them is through the
negligence of their responsibilities
toward staff, third parties, other
institutions and society as a whole that
could result in a legal suit against them.
This could bring so much cost to them. A
clear example is the recent explosion at
Bogoso Apiatse.
All organisations have liability loss
exposures. To properly identify, analyse
and treat an organisation’s liability loss
exposures, risk management and
insurance professionals must first
understand the concept of legal liability
and the common sources of these
exposures.
Legal liability can be imposed by civil
law, criminal law, or both. Liability
insurance covers liability imposed by
civil law. Insurance for criminal liability
is not permitted by law. Any wrong
against society, criminal law will impose
a penalty against you. Civil law protects
rights and provides remedies for
breaches of duties owed to others, and
this is a classification of law that applies
to legal matters not governed by
criminal law.
A single act can constitute both a
civil wrong and a crime in some
instances. For example, if a vehicle driver
cause death to a pedestrian, law
enforcement agencies may charge the
driver with manslaughter – a crime. The
driver may also be subject to civil action
by the estate of the deceased pedestrian
for medical bills, funeral expenses, loss
of support and other damages that the
law allows. Insurance coverage will not
respond to the criminal charges. It could,
however, provide payment for the civil
claims.
Legal liability is the legally
enforceable obligation of a person or an
organisation to pay a sum of money
(called damages) to another person or
organisation. Legal liability can be based
on tort, contract or statutes.
Tort
A tort may be a civil wrong (also
referred to as a private wrong). Most of
the insurance claims covered by liability
are based on tort law, which protects the
rights of individuals. These rights
include the right to security of person,
property, reputation and privacy. Where
a right exists, others have a
corresponding duty to respect it and to
refrain from any act or omission that
would impair or damage it. Any
wrongful invasion of legally protected
rights entitles the injured party to bring
legal action against the wrongdoer for
damages. The numerous types of torts
fall into three broad categories:
negligence, intentional torts, and strict
liability torts.
negligence is based on four
elements. each element must be present
for a negligent act to qualify as the basis
for a negligence tort. A motorist who
drives at an unsafe and excessive speed,
and as a result causes an accident that
injures another motorist, has committed
the tort of negligence. In contrast, a
driver who narrowly misses another
vehicle hasn’t committed the tort of
negligence, although the act was
perhaps negligent. The motorist whose
vehicle was narrowly missed will not
have the basis for recovering damages
from the other driver because no actual
loss or damage occurred.
An intentional tort does not
necessarily have to be performed with
malicious or hostile intent. An example
of an intentional tort is libel – the
publication of a false statement that
damages a person’s reputation.
Strict liability (or absolute liability) is
a liability that is imposed even though
the defendant acted neither negligently
nor with intent to cause harm. Strict
liability, for example, can result from
owning wild animals or performing
ultra-hazardous operations such as
blasting.
is based on
four elements. Each
element must be present
for “Negligence
a negligent act to
qualify as the basis for a
negligence tort. A
motorist who drives at
an unsafe and excessive
speed, and as a result
causes an accident that
injures another motorist,
has committed the tort
of negligence.
Contract
Contracts also impose legal liability
aside from tort. If one party fails to
honour the contractual promise, the
other may go to court to enforce the
contract. Liability based on contracts can
arise out of either a breach of contract or
an agreement in which one party
assumes the liability of another.
A breach of contract is a failure to
fulfil one’s contractual promise. A
common type of breach of contract
involves the promise made by a seller
regarding its product. If the product fails
to fulfil its promise, the
warranty/promise has been breached
and the buyer can claim against the
seller.
Statutes
In addition to torts and contracts,
statutes are a third major basis for
imposing legal liability. Written laws at
the local level are usually referred to as
ordinances. Statutes and ordinances can
modify the duties that persons owe to
others. Thus, the duties imposed by
statute or ordinance may be used as
evidence of a person’s duty of care in a
tort action. A statute can also impose
legal liability on certain persons or
organisations regardless of whether they
acted negligently, committed any tort, or
assumed liability under a contract.
Liability Insurance Coverage
Liability coverage protects both the
insureds and the parties that may suffer
an injury, either financial or physical. All
businesses, including not-for-profit and
governmental organisations, face the
possibility of liability losses arising from
their premises, operations, products and
advertising. Liability insurances such as
product liability, public liability,
professional indemnity, employer’s
liability, etc are designed to serve as the
primary layer of protection against these
loss exposures.
This is the main reason why
industries and organisations should be
more aware of their liability exposures
so they can limit the cost they could pay
by taking the appropriate insurance
cover.
The writer is a staff of the National
Insurance Commission, a Chartered
Insurance Practitioner, and an Associate
of the Chartered Insurance Institute of
United Kingdom and also Ghana (ACII-
UK, ACIIG),
Araba is the Head of Business
Development Unit at Ghana
Communication Technology University,
Accra. She has MBA in Finance from
GIMPA and BSc. Chemistry from UCC.